How Can Data Analytics Boost Human Resource Management

Data analytics have transformed human resource management. Discover why it's essential for companies to use HR metrics and analytics to make informed decisions.

Data Analytics

The essence of any successful business lies in recognizing the pivotal role of its people. It’s no longer a new concept, and an anonymous industrialist has very well said, “A company’s success is directly proportional to the investment it makes in its employees.” The industrialist was speaking from a gut perspective. S/he recognized the importance of the human component in a business and actively sought to enhance revenue by cultivating an inspired, motivated, and committed workforce.

Currently, human resource managers play a critical role in managing a company’s most valuable asset – its employees – and providing insights to upper management. However, with the advent of technology, the role of HR leaders has not only changed but also gained a fresh perspective. Traditionally, HR’s focus has been limited to descriptive and diagnostic activities, such as managing employee records, hiring and firing, and addressing workplace conflicts. But with changing tides, the role of HR leaders has evolved to become more predictive and prescriptive.

Such an evolution has fueled success, and in order to help HR leaders stay ahead, we will explore how data analytics can revolutionize human resource management.


  1. According to a report by McKinsey, companies that use data analytics in their HR practices are more likely to improve their overall business performance. The report found HR leaders who make the optimum use of decision-making were twice as likely to report stronger financial performance than their peers.
  2. A study by Deloitte found that companies using data analytics for workflow outcomes can attract and retain top talent, resulting in better recruiting and retention efforts.

Answering the HOW?
Firstly, while addressing “the how,” it is crucial to convert data analytics to people analytics. Organizations can now use data analytics to make HR decisions instead of relying on gut instincts. This new set of analytics can help HR leaders evaluate employee performance and compensation based on actionable information rather than relying on subjective opinions.

Being more strategic and people-focused, business leaders are turning to HR to reorganize, rearchitect, and reimagine the way the organization works. It’s not just about capturing and reporting data; it’s also about generating actionable insights, testing hypotheses, and identifying solutions that are used to inform business decision-making.

Here are a couple of ways to create a strong people data and analytics foundation that allows HR leaders to innovate, experiment, and drive change across businesses.

Build a High-quality Data Foundation
People’s data can be easily collected and securely stored on a single cloud-based HR system that the whole organization can trust. Such advancement has helped in creating a high-quality data foundation that HR leaders can build upon to accelerate the HR analytics journey.

To establish a strong foundation for data governance, it is essential to adopt automated real-time dashboards and build data guardrails through automation. These dashboards not only help in tracking progress, creating reports, and presenting personalized insights but also contribute to the overall data governance workflows. In other words, automated dashboards and data guardrails are integral components of an effective data governance strategy.

Use Data to Drive Business
Having a clear understanding of the lagging and leading metrics will help people leaders strategically convert data into actionable insights. By gathering feedback and following patterns closely, HR leaders are better able to understand the impact of new ways of working and certain policies on employee well-being and performance.

It can be achieved with the help of a pulse survey. While conducting different surveys, it is very important to be agile when connecting HR and business key performance indicators (KPIs). Moving further, let’s discuss some of the crucial areas in which organizations can achieve better results and bring the department in line with other business operations.

Five Key Areas
1.Evaluating Employee Performance
Traditional performance evaluations are often based on simplistic metrics like gross sales numbers, which can overlook important factors like mentorship or relationship-building skills. By applying data analytics to the process of evaluating employee performance, HR can identify trends and factors that might otherwise go unnoticed, leading to more accurate and effective performance evaluations.

2. Determining Raises and Promotions
Using data analytics to determine appropriate pay raises and promotions can help prevent valued workers from slipping through the cracks. By analyzing performance-based data, HR can ensure that workers are being compensated fairly and recognized for their contributions to the organization, which can increase employee loyalty and performance.

3. Controlling Attrition, Increasing Retention
By examining data on employee engagement and satisfaction, HR can identify patterns that might be leading to high levels of employee turnover. By addressing underlying issues and improving employee engagement and satisfaction, HR can reduce attrition rates and increase retention, which can save the organization money and improve morale.

4. Evaluating Employee Engagement:
The key to a high-performing company is often the level of employee engagement. By measuring employee engagement through employee feedback, HR can identify areas that need improvement and initiate engagement by asking for employees’ opinions.
Engaged employees tend to be more excited about their job and perform better than average, and they are less likely to look for new career opportunities outside the company.

5. Measuring Individual and Group Development:
Data analytics can be used to measure the growth and development of individuals and departments, particularly in training programs. By using hypothetical situations and AI technology to customize training programs based on employee feedback, HR can improve employee skills and knowledge, leading to increased productivity and job satisfaction.

Wrapping Up
The data and statistics clearly demonstrate that the use of data analytics in human resource management can provide significant benefits to companies. Through the use of HR metrics and analytics, organizations can gain insights into employee performance, compensation, retention, engagement, and development. This can lead to better decision-making, increased employee satisfaction and productivity, and improved talent acquisition and retention.

The studies by McKinsey and Deloitte highlight the strong link between the use of data analytics in HR practices and improved business performance. The power of data analytics can help HR become more efficient, effective, and strategic, driving the success and growth of the organization. Companies that embrace data analytics for HR decision-making are likely to gain a competitive advantage in the marketplace and ultimately achieve better business outcomes.

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